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State of U.S. farm economy fails to prompt quick action

Feb 06, 2002

A recent report from two University of Georgia Extension economists describes the current state of the farm economy, and its findings should come as no surprise to most growers in the Southeast. It may, however, come as surprise to many of our senators and representatives, who, judging by their actions of this past December, aren't convinced yet that we are in the midst of a real crisis on the farm.

One of the more notable findings in the report is this: In 1996 — the year the last farm bill was signed — net farm income was a record $54.8 billion. This amount would have been $47.5 billion without government support. In contrast, net farm income without government support for the past three years would have been $22.8, $23.5 and $29.4 billion, respectively.

This 38 to 52 percent drop in the market portion of net farm income is among the most dramatic in modern history. Apparently, states the report, the 1996 experiment of shifting the agricultural sector to the free market has failed, and debate over the new farm bill is testament to that fact.

Unfortunately for most farmers, the failure of the 1996 legislation wasn't spectacular enough to force the U.S. Senate to act when it first had the opportunity.

Market prices for most basic farm commodities covered by federal farm legislation have declined in Georgia during the past three to four years, states the report, initiating higher government payments to compensate for lower prices. In addition, tobacco farmers have seen quota reductions of 45 percent since 1997.

The report goes on to say that crop receipts currently make up about 35 percent of total farm cash receipts in Georgia, down from earlier percentages that were as high as 45 percent. A reduction in crop receipts, state the economists, significantly affects the well being of the state's farmers.

“Farm lenders tell us that many farm operating loans are repaid with money received in the form of federal payments,” says the report. “And the concern in the industry is that many of these payment are annual appropriations as opposed to annual programs legislated in the 1996 farm bill.”

But the low crop prices haven't affected everyone adversely. Cheap feed boosts the profits of those who feed animals, and the poultry industry has become a major part of Southeast agriculture. Also, consumers continue to enjoy a reliable, inexpensive supply of food.

Government farm payments undoubtedly help farmers to stay in business, but they also benefit the entire population by helping to preserve our source of relatively inexpensive food. Currently, only about 11 percent of our national disposable income is spent on food — the lowest of any developed nation.

Many of the lawmakers who have worked to delay action on a new farm bill cite record net cash farm income as the primary reason. Some argue that there's little need of rushing new farm legislation since U.S. growers are making more money than ever.

But the Georgia report states that the discrepancy between record net cash farm income and the cautious mood among farmers exist for some key reasons. One of these reasons is that about 40 percent of this net is from government payments. Government support for the past three years has accounted for 49, 49 and 40 percent, respectively, of net income.

About two-thirds of farmers don't get program payments, according to the report, and most payments go to the producers who make the most gross revenue. The top 10 percent of farmers get 63 percent of the government payments. Thus, the next farm bill likely will allow large and mid-size farm operations to remain economically viable.

Looking ahead to the remainder of this year, the Georgia report states that global weakness is expected to linger throughout much of 2002, keeping global agricultural markets soft. In any event, say the economists, it looks as if farm program payments will be necessary to keep farmers economically viable, at least for the next year or two.